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Advice on life insurance: your expert guide

9 mins read
by Nick Green
Last updated Tuesday, April 9, 2024

Find out about the different kinds of life insurance, the various reasons you might want (or need) to have it, and how to choose the right life insurance products and advice for you.

Life insurance protects your loved ones financially in the event of your death – or alternatively, gives you protection in the event of someone else’s death, if you rely on that person financially.

An expert life insurance adviser can help you choose the best products for your circumstances, so you cover yourself to the right level of risk and don't waste money on unsuitable policies.

What is life insurance?

Life insurance is an insurance policy that pays out a lump sum on the death of the person insured.

Sometimes, the insurance will only pay out if the death takes place before a specified age (a term life policy), but you can take out insurance that will pay out whenever the death takes place (whole-of-life policy).

Do I need life insurance?

If your family would struggle financially in the event of your death, a financial adviser may recommend life insurance.

The same applies if you depend financially (either partly or wholly) on another family member, such as your spouse.

A married or cohabiting couple might take out a joint life insurance policy, to cover the surviving partner if the other one dies.

You can find out more about how much life insurance you need here.

Is life insurance compulsory when getting a mortgage?

Technically, life insurance is not compulsory when you buy a home with a mortgage, as the lender can recover the mortgage from the sale of the property.

However, if you are living with a partner and/or dependants, you will not want them to be made homeless by the enforced sale of the house.

For this reason, if you have a family, you should consider life insurance essential when you take out a mortgage.

A joint-life policy will ensure that your mortgage is fully paid off if either you or your partner should die.

What are the different types of life insurance? 

There are so many different types of life insurance. If you’re asking yourself, ‘what life insurance do I need?’, here’s a helpful overview of the main policies.


A term life policy covers you for a set period of time, so will only pay out if you die before a certain age.

For example, you may want the cover to last until the end of your working life. Or until your children reach adulthood, meaning they are less likely to be dependent on you.  

Increasing term

As the name suggests, within increasing term life insurance, the pay out and premiums go up the older you get.

It’s designed to increase in line with inflation so that the sum that you want your loved ones to receive retains its value in real terms.  

Decreasing term

Decreasing is the opposite – your payout shrinks the older you get.

These policies are often linked to a big loan like a mortgage, and the sum decreases as the outstanding debt decreases

Level term

With level term insurance, your premiums stay the same throughout your policy.

It doesn’t matter if you die after five years or 30 years – the payout stays the same. 


Whole-of-life policies pay on your death, whenever that may be.

As this means a definite payout at some point, premiums will be higher than for a term life policy, and you will need to keep paying them until your death.

This means that you might, in theory, pay more in premiums than would be paid out on your death if you live a long time. However, one popular use for a whole-of-life policy is to cover an inheritance tax bill. 

Joint cover

Joint life insurance is one policy that covers two people – usually you and a partner or spouse.

It only pays out once and is often used when people are taking out a joint mortgage to make sure the surviving person isn’t left to pay off the entire mortgage on their own.

Similarly, it can be used to protect business partners and the business. Sometimes, it’s simply cheaper than taking out two separate policies. 

You can choose between a payout on the first death or the second death. People who opt for the latter often want the payout to go to their children or other beneficiaries.  

Over 50s

Over 50s cover, often called funeral plans, is a way to leave a gift to loved ones when you die.

They’re usually used to prepare for your funeral costs. You can take a plan out when you’re over 50 and pay premiums each month.

The payout will depend on the plan you choose and the number of premiums you’ve paid. 

Critical illness

This insurance gives you peace of mind that you’ll be able to cope financially if you become critically ill or injured and can no longer work.

If this happens, you’ll usually be paid a tax-free lump sum, which people tend to use to pay off the mortgage or replace lost income.

Check each policy wording carefully, because only specified illnesses and injuries are covered. 

Terminal illness

Terminal illness cover is slightly different from critical illness protection. It lets you receive the benefit of your life insurance if you become terminally ill and you have been told that you will pass away within a certain time.

It’s often an add-on to other life insurance policies, like whole-of-life cover. 

Free parent

A few insurers offer these attractive policies, which are free of charge and payout to your children – but they normally only last a year and have a £15,000 payout.

The idea is to take out a policy for each of your children (usually for those under four) as immediate protection while you consider your longer-term life insurance plans.

Learn more: can I have more than one life insurance policy? 

Using life insurance to cover an inheritance tax bill

You can use a whole-of-life insurance policy to cover any inheritance tax (IHT) that may be payable on your death.

One of the common problems of IHT is that it often needs to be paid before the money in the estate is released – and your beneficiaries may not have enough accessible money to spare.

A solution used by some people is to set up a life insurance policy specifically to cover the IHT bill.

Please note the policy has to be set up to pay into a trust that is outside your estate so that the payout itself will not be taxed and can be used to pay HMRC.

If the policy does not pay into a trust, then the payout itself will be subject to IHT!

Trusts are a specialist area, so be sure to consult a financial adviser first, and a solicitor when setting them up.

Find out more about trusts and estate planning.

How to get life insurance

It’s fairly simple to take out a life insurance policy.

You can compare policies on price comparison sites and take one out online, as you would for car insurance, for example.

And if you want to change your policy, it’s usually possible to amend it or cancel it and move to another provider.

Just be aware that there may be fees to cancel (known as a surrender value).

The cover you need really depends on your circumstances and that of your family, so it’s worthwhile speaking to a financial adviser to get life insurance advice before taking out a policy to make sure it’s well suited to your needs and financial situation.

Can I buy life insurance for a family member?

You can buy life insurance that covers someone else (such as a parent), for example, if they don’t feel confident doing it themselves.

However, you must, of course, have that person’s signed consent to be insured in that way.

You must also be able to demonstrate ‘insurable interest’ in that person.

This means showing that their death would have a negative impact on your finances.

If you don’t depend in any way on that person for your financial security, you won’t be able to get life cover on them.

This is to ensure that a person cannot benefit financially from another person’s death.

In short, you can insure your spouse, or a parent / other relative who supports you financially, but you are unlikely to be able to insure your children (unless they earn an income on which you depend, e.g. from acting).

Can I buy life insurance for an employee?

If you run a business, you’ll know that some members of staff are essential to your operations and very hard to replace. These are known as ‘key persons’.

Many businesses that recognise these key persons will take out special life insurance to cover them in the case of death or incapacity.

Find out more about key person insurance.

How much does life insurance cost?

The cost of life insurance varies significantly based on factors such as your age, state of health and lifestyle (such as whether or not you are a smoker).

It will also vary from provider to provider – and, of course, based on what size of payout you want.

However, it is possible to give a rough estimate.

For example, if you are a 30-year-old non-smoker and you want a term-life policy limited to 30 years, paying out £100,000 if you die within that time, your monthly premium would be in the region of £6.

Mortgage life insurance would be somewhat cheaper, as the mortgage balance would reduce over time.

Some lifestyle activities, such as smoking, make life insurance much more costly.

If you are a smoker, then monthly premiums are typically twice as expensive from age 40 upwards.

Can a financial adviser help me find the best life insurance?

A qualified IFA who specialises in life insurance can be by far the best way to find the right policy for you and the most affordable one, too. 

Price comparison sites are an increasingly popular way to buy insurance of all kinds, but with life insurance, it is advisable to take a little more care.

The loss of a close family member is one of the biggest upheavals a person can face and is the worst possible time for any financial insecurity or uncertainty.

Furthermore, sometimes it can be difficult to find affordable life cover or critical illness insurance, particularly if you have pre-existing conditions.

Learn more: life insurance vs critical illness cover, what's the difference?

This example demonstrates how insurance providers can effectively close their doors to those considered to be high-risk, but how personal financial advice can overcome these obstacles and provide access to affordable advice.

To ensure that your life insurance is fully suited to your needs, it is best to include it as part of your overall financial plan – which your financial adviser can help you to put together.

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Nick Green
Nick Green is a financial journalist writing for, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.